Stamp duty tax on second homes to rise

The rate of stamp duty paid by people buying a second home is to rise, Chancellor Rachel Reeves has announced in the Budget.

Stamp duty is a tax paid when buying property over a certain price in England and Northern Ireland.

People buying an additional property are already subject to a higher rate, and from Thursday this will rise from from an extra 3% to 5%.

Reeves said the move would “support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years”.

However, analysts say the increase rate could affect landlords’ willingness to buy more properties.

Paul Johnson, director of the Institute for Fiscal Studies think tank, said renters would “pay part of the cost” of the increase in stamp duty for second-home buyers and landlords “as the supply of such properties falls”.

Ben Beadle, chief executive of the National Residential Landlords Association, said: “The chancellor has failed to heed the warnings of the Institute for Fiscal Studies that higher taxes on the rental market lead only to rents going up.

“What tenants needed was a Budget to boost the supply of new, high-quality rental housing. What we got is a recipe for less choice and higher rents.”

But Ben Twomey, chief executive of campaign group Generation Rent, said: “Renters who have been able to save a deposit to buy a home will get a boost from the increased stamp duty surcharge.

“The higher costs for investors will make it easier for first-time buyers to compete in the house sales market.”

Currently, buyers of homes worth less than £250,000 do not pay stamp duty. This was doubled from £125,000 under Liz Truss’s mini-Budget in September 2022.

The threshold is £425,000 for those buying their first property, with the level raised from £300,000 in the mini-Budget.

However, next March the thresholds are due to revert back to the lower levels set before the mini-Budget.

The current rates of stamp duty are:

• £0-£250,000 (£425,000 for first-time buyers) = 0%
• £250,00-£925,000 = 5%
• £925,001-£1.5m = 10%
• £1.5m+ = 12%

From Thursday, people buying a second home will pay an extra 5% on top of this.

Meanwhile, the Budget included a £500m boost in funding for the Affordable Homes Programme, which the government said would deliver up to 5,000 new social and affordable homes.

Reeves also confirmed the government would reduce Right to Buy discounts in a bid to increase the supply of council housing.

The Right to Buy scheme allows tenants renting council-owned homes to buy them at a discounted rate.

The chancellor said councils would also be able to keep 100% of the money raised from sales of housing so this could be reinvested into new supply.